Law enforcement officials predict that the next two years will be banner ones for the exposure of financial fraud.

Law enforcement officials predict that the next two years will be banner ones for the exposure of financial fraud. "This is probably the biggest surge in financial crime maybe since the savings and loan crisis of the 1980s," said David Cardona, head of the criminal division in the FBI's New York office, where most of the bureau's Wall Street probes start. Cardona and others agree that the trend for bad behavior on The Street is always the same: When the market runs strong, the fraudsters go to work. When the market falls apart, they get caught. "We're having more people coming forward, and that's why we're having more cases," he said. Cardona said the New York FBI office has noted an uptick in the "suspicious activity reports" from banks, while the number of mortgage fraud cases is at a peak.
Investigators also are seeing more desperate fund managers and corporate execs who doctor the books to convince investors they're solvent.

Insider trading is also on the rise. Just last week, a former Lehman Brothers broker and four others were busted for allegedly trading inside information. A day trader allegedly steered some of those tips to his girlfriend Maria Checa, a 1994 Playboy playmate, according to authorities, who suspect the scheme netted $4.8 million.

In the past fiscal year, the Securities & Exchange Commission has brought "the highest number ever" of insider trading cases, said Linda Chatman Thomsen, director of the enforcement division. That included going after the former chairman of an Enron affiliate, a former partner at accounting giant Ernst & Young and the mayor of Beaufort, S.C.Agency enforcement actions have risen in the past three fiscal years to 671 from 574, while the number of individuals charged with some type of financial impropriety jumped 40%, records show. Howard Meyers, a former SEC lawyer and a professor at New York Law School, sees more Madoff-like cases - though not as huge - coming down the road. "There are potential frauds that are just waiting to be discovered," he said. Meyers said during good times, pressure mounts to keep the money flowing. "It creates an environment of excess where there's perhaps pressure, perceived or real, for those with a substantial net worth to keep up appearances," he said. The downside of the market brings out entirely different schemes.